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RBA surprises experts with cash rate call

The Reserve Bank of Australia has delivered an unexpected decision at its monthly board meeting.

In an unanticipated move, board members have decided to cut the official cash rate to a record low of 1.25 per cent.

None of the 38 experts surveyed by financial comparison website finder.com.au predicted this outcome.

Many cited soft inflation and a stubborn Australian dollar as the reason the RBA would remain in ‘wait and see mode’ and choose to hold the rate.

Australian Associated Press chief economist Garry Shilson-Josling explained: “The RBA prefers to link its cash rate moves to quarterly CPI releases and the next is not until late October.”

Many of the experts believed that if the RBA was to make another cut this year, it would most likely be in later months.

In response to the RBA’s surprising decision, CoreLogic head of research Tim Lawless commented: “The RBA is likely to be keeping a keen eye on the housing market since the previous cuts appear to have caused a lift in many of the key housing market indicators.”

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“CoreLogic’s hedonic index has seen some acceleration in the rate of capital gain across the already hot Sydney and Melbourne markets and the value of investor housing finance commitments have recently rebounded to the highest levels since August last year,” he explained.

Mr Lawless said that the RBA is likely to make another cut later this year.

“The most likely timing will be the November RBA meeting when September quarter inflation data is available,” he said.

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